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TAKING A CHINESE COMPANY GLOBAL

Group

1. Why was Haier so successful in China?

Zhang Rui Min Visionary leadership Goal to take Haier global Challenge conventional wisdom Believes that competition leads to improvement and creating a localized brand name is paramount

Commitment to Quality Strong emphasis on commitment towards quality than their competitors. E.g. Zhang once ordered workers to smash 76 refrigerators which did not meet the required specifications. Esp so when pple have low perception of Chinese brand

1. Why was Haier so successful in China?

Continuous Innovation differentiation is the key to succeed in the white goods market; differentiate via innovation continuously increased their product range through innovation; about 96 product categories with 15,100 specifications. Garnered awards for its innovative products; ensured healthy cash inflows to the company in the long run Building the Brand Followed a single brand approach, as a strong brand name would help them in their approach to go global. strategy involved developing brand around a single product first, then leveraging on that success to diversify into other products

1. Why was Haier so successful in China?

Market Advantages Haier Products commanded 20% premium over other brands, but is still a market leader in sales, coz of superiority in 3 areas: Market responsiveness: meet customer needs Aftersales service: computerized system, service network of 5,500 independent contractors, one for each sales outlet Distribution: high on operational efficiency; a single company called Haier Logistics serves the entire group for all kinds of products, unlike its Chinese competitors; a unified logistics department for all product lines which reduced transportation costs (economies of scale) and enabled speedy delivery.

2. Was Haiers decision to globalize into developed markets early on a good strategy?
Yes Competition in China Facing intense competition (Whirlpool and GE) and price wars in the domestic market Prove itself, achieve highest quality standards and a ready-made reputation focus on the difficult developed markets first and after establishing a considerable presence over there, then go after the relatively easy emerging markets; create a localized brand name. e.g. Haier is a localized US brand instead of imported Chinese brand Product Differentiation Strategy focused on niche products, offered variety of versions for different market segments, to be in line with their belief in being responsive to customer needs No Stiff competition overseas The competition in the developed market was tough as most of the market players had established themselves there Lack of a strong brand Haier could not get a large market share in the US as it was an unknown brand there and Chinese products are perceived to be having poor quality products. In the developed markets, the consumers are not willing to sacrifice quality at any price. Haier, being a Chinese company had to face these issues.

Ample opportunity available to be exploited to its full potential in the emerging markets

3.Can Haier build on its success in niche products to become a dominant global brand in high-end white goods?
Yes Initial entry challenge into US market

Haier global expansion strategy in 1997


Product Differentiation Strategy Lack of a strong brand
Initial difficulty to get Haier products into large retail chains like Home Depot, WalMart etc. People were not ready to buy Haier refrigerators, as they could not recognize it as a prominent brand for other appliances

Revenue: three thirds goal

entered developed markets with a few models to test the waters and avoid major competitors. E.g. in US they manufactured compact refrigerators for students and offices. With minimal competition, these niche products brought in high margins, and also got the attention of major retail chains like Wal-mart. Once they were successful in this segment, they decided to launch regular products like the standard refrigerators and washing machines. Increase in brand visibility

International Strategies

4. Is Haiers three thirds strategy a viable or wise approach?

Haier global expansion strategy in 1997 2/3 made in China Cost advantage 2/3 sales overseas Bigger market potential outside China

1/3 from goods produced and sold in China

1/3 produced in China and sold overseas

no one market accounts for more than one third of our business Lorenzo Zambrano, CEO of CEMEX
one-third domestic sales, onethird exports, and one-third produced and sold abroad Yang

1/3 produced and sold overseas